Soybean Oil Has A Friend In Food…Biofuel Producers Take Note.

Crush expansion, meal and oil basis volatility, regulatory changes, headline risk. 

Its been a crazy year for the bean oil market.

But as the sun begins to set on the 2024/25 crop year there are 2 things that warrant discussion in the bean oil balance sheet:

1) WASDE estimates for biobased diesel for this year were and are overly optimistic.

2) Food/Feed/Other demand for soybean oil is turning out to be a real demand bright spot.

Biobased Diesel Market Has Yet to Materialize

Through 7 months ending April, bean oil demand for Biobased Diesel (BBD) sits at 6.4 bil lbs. 

USDA estimates BBD bean oil demand at 12.9 bil lbs for the year. 

We need 1.3 bil lbs per month May-Sep to hit that #.

May will be closer to 700 mil lbs, putting us further behind.

Using June-Sep demand at 1 Bil lbs per month, Oct-Sep demand lands at 11.1 bil lbs and that feels optimistic.

That’s down 1.8 bil lbs vs the USDA WASDE estimate.

Exports and Food/Feed/Other Demand Have Taken Up the Slack

The bean oil export story is well documented at this point.  Its easy to track with data reported weekly. 

But its not the only positive demand story.

The Food/Feed/Other line (just “Food” for the rest of the article) in the WASDE balance sheet is just now coming into focus. This number is not published as a number each month, but as the season progresses one can see it by looking at the other data points in the balance sheet.

That’s what chart above does. It shows YTD implied Food demand at a 15.4 bil lb pace for the crop year. 

WASDE is sitting at 13.9, a 1.5 bil lb understatement.

That’s a good thing.

But even so,

Does the Big Swing Back Into Food Demand Even Matter?

It’s a fair question. 

BBD demand reductions and Food demand increases essentially offset this year, negating a lot of the price impact of these misses.

But I think it could matter a lot when BBD demand rebounds in early 2026.

Here’s why:

As a veg oil trader I operated on thin, commodity margins. A penny/lb price move was meaningful to me.

As a biodiesel trader it was the same. Veg oil costs were ~90% of the input costs. Its price relative to my final biodiesel price was the primary driver of profitability. Every penny mattered.

But in a food business? Veg oil is just another ingredient in a cookie, or restaurant menu item, or a potato chip. Advertising, labeling, co ingredient prices, factory run schedules. All these things were MORE important than even a 5% move in soybean oil prices.

Which leads me to this point….

Food Demand is Sticky.

Ingredient buyers are busy.  Veg oil is one of potentially dozens of ingredients for which they are responsible.  It trades in 3-6 month transactions, sometimes even longer.  Changing ingredients can often lead to a cascade of other necessary changes in their manufacturing process.

For these and other reasons, once you get the business, its yours to lose.

This year’s hard work by bean oil sales teams to take food market share from other oils will pay dividends as we move into 2026.

They have earned some measure of pricing power this year.

BBD Soybean Oil Buyers May Find It Difficult In 2026 Regardless Of Price

What does it take to force a food oil buyer to switch back out of soy? 

I don’t know, but I can think of a few reasons why they wouldn’t.

Canola comes with unknowable tariff risks due to reliance on imports.

Sun/Corn/Cotton oil is supply constrained.

Palm carries its own tariff risks, along with negative stigma in Western markets.

If I’m a buyer for a food business, I’m willing to endure some pain to stay on domestic soybean oil.

And if I’m a soybean oil seller…

I like loyal customers. 

I like customers that buy my product because they like it, not because they are forced into it via government policy. 

I like customers that are consistent.

For those reasons, I would be reluctant to turn my back on food customers to chase a hot bid from a BBD plant.

To me the story is about just how hard (translated “expensive”) it might be to get soybean oil supply chains shifted over to BBD plants.  Not because its difficult to send a railcar one direction vs another.  But because soybean oil producers will be reluctant to give up their food customers.  And food customers will be reluctant to switch to other oils.

There are implications here for RIN prices, LCFS credit prices, imported feedstock flows, BBD margins.  The whole complex could feel this.

So a word to the wise if you’re jumping back into bean oil after importing other feedstocks the last couple years.

Its going to take a minute.

It will cost more than you think.

Availability may prove elusive, even with a strong bid.